Financing the Investment Project: Leaving Nothing To Chance

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The importance of financing is so great it pays to leave nothing to chance and assumption. Knowing the local lenders and what they like to invest in is critical to finding the right lender for your investment project. Also, presenting a compelling case to the lender is important. These two aspects lay the foundation for creating a successful project.

This goes back to preparation and research. You might also want to research private financing, which entails knowing wealthy people, or knowing someone who knows wealthy people.

Having a good idea of what’s the favored investment in a local area will no doubt play a part in the choice of the investment project. But if you have followed advice and have become knowledgeable of your area, you should have a good idea about trends and the financing possibilities.

You have also, no doubt, become knowledgeable enough to exude confidence when you present a project to be financed. It also pays to have gathered support from influential people you know in the area who can vouch for you. Having references will allay doubt, unless you know the lender personally. It may be a process getting to the right decision maker, so you should be persistent and not give up at a first brush-off. Getting to know the assistant might be the first step, and it might take more than a few visits to get in the right door. Everything you learn from the first few failures will be important in devising a better plan.

Establishing rapport with those along the way will help clear the path — if what you present is compelling, you can advance, but the lower players will not likely stick their heads out if you seem unsure are don’t have a good presentation.

This is where having a good team already assembled helps . If you have chosen a well-known attorney and accountant, and have chosen property management (if it will be needed) and solid, quality contractors, then this shows that work has been done and others have looked at the project — it shows you are prepared and that you are a serious investor.

Having a good resume will be impressive, one that shows your skills and experience and why you would be good at this type of investment. Most lenders want to say Yes, but they want everything in place to be able to say Yes.

Make it as easy as possible for the lender by being co-operative and having others vouch for you — you might be good at selling yourself, but to a lender it will only be self-serving — a lender will be impressed if others who are influential and respected are selling you.

The bottom line is that the more you know about the right decision-making lender, the better you can plan a presentation that will be accepted favorably. Having all the numbers clearly crunched by an accountant, having all the legal ramifications covered by an attorney, all the construction aspects assessed bya contractor, all the management lined up and factored in, will present a strong case for acceptance — much stronger than if you go in alone and brag on yourself and idea and basically ask a lender to go on faith .

When an idea is reasonable, researched and the numbers make financial sense, AND you have a team behind you, the chances of getting financing are greatly enhanced — who knows, you may have lenders competing for the project, which would be even better.

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5 Comments

  1. We are a private lender in Sarasota Florida and have done a few hundred million in loans over the last 18 years. But I can tell you that the underwriting has changed quite a bit in recent years. In the glory days before this housing crisis we would write loans and had some comfort knowing that even if the borrower makes a mistake the market appreciation would most likely bail them out. And for the most part that was the case.

    But now more than ever the “exit strategy” is a crucial part of the underwriting for us. Basically we have to ask ourselves… “How are we going to get out?”. And a sale of the property is no longer a good enogh exit strategy. Even at a very low loan to value, we still have a lot to consider when writing a loan. And 80% of all the loans we wrote in 2007 have gone sideways and we have foreclosed, or taken deeds in lieu on them. And all of those borrowers look GREAT on paper.

    Its a challenging time for lenders. So the only advice I can give is… make sure you put yourself in the lenders shoes and ask yourself if you would do the loan if you were the lender. And then be absolutely sure you have a legit exit strategy if you are looking to refinance, or sell.

  2. Securing a commercial mortgage approval is key to any project. Without financing your deal is just a dream. A professional loan agent, broker or other intermediary can really help get a deal done. They speak the language of the lenders and know who’s funding loans and who’s not.

    MasterPlan Capital LLC – Commercial Real Estate Investment Bankers
    http://www.masterplancapital.com/
    Commercial Mortgage Lending (from $1MM)
    Equity Financing (from $10MM)
    Asset Management

  3. Your best way of obtaining financing is by putting some of your own money into the deal! Its amazing to see the number of people trying to borrow 100% with nothing down and no where withall!

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